The Financial Ombudsman Service (FOS) says it deals with more than 800 complaints a week about payment protection insurance (PPI).

There are more than 12 million PPI policies in force.

"It is still the single biggest source of complaint, amounting to about a third of the total," said a spokeswoman for the FOS. "We are upholding about 90% of the cases we deal with, and with one firm 100% of the cases," she added.

Consumer groups say there are frequent restrictions on when a customer can claim, and that the insurance has often been mis-sold to customers taking out a loan. In the past few years the authorities such as the Office of Fair Trading, Competition Commission and the Financial Services Authority (FSA), have taken an increasingly dim view of PPI, which is very lucrative for the banks and other lenders which sell it. The Competition Commission recently decided to impose severe restrictions on the sale of new PPI policies.

Obstruction

Lenders and insurers are very reluctant to agree with a customer that their PPI has been mis-sold. As a result, the number of complaints that were taken by disgruntled consumers to the FOS shot up last year, prompted by widespread media publicity. The FOS received 26,234 PPI complaints, up from the 4,889 dealt with in 2007.

At the end of last year complaints were running at 500 a week, but that they are still increasing and last week alone a further 858 were lodged with the FOS. "We are upholding an unprecedented number of consumer complaints about PPI," said an FOS spokeswoman.

"We have reported our concerns about some firms who seem to be systemically and deliberately mis-handling complaints," she added. Last year the FOS asked the FSA to consider taking action against those firms which were being obstructive.

A spokeswoman said the number they were upholding was "unprecedented."